Page 30 - THE MARKET WHISPERER

THE MARKET WHISPERER 29

• Always remember: there is someone who will profit and someone who
will lose from every analyst recommendation.

• Remember that behind every stock transaction, there is a buyer or
seller who feels he or she is smarter than you.

• Remember: the big money is not where information is clearly divulged
to the public. If 90% of investors lose their money, then they’re clearly
doing something wrong!

The Mid-Term

A range of several weeks to months is the inherent advantage for hedge
funds. They operate with large sums, making it difficult for them to
maneuver in the short term, and they are justifiably fearful of the long term.
Due to the capital they hold, they can support stock prices for periods of
time, which increases their chance of profit. Their advantage is in shifting
large amounts of money and being somewhat skilled at knowing where
money is currently flowing. Although sometimes they also lose.

The Short Range

The very short term, measured in seconds or minutes, is the market
makers’ and specialists’ advantage, which we will learn more about later.
They, in contrast to the rest of the general public, pay no commissions.
They receive the commissions! Because their role involves coordinating
real-time buy and sell commands, they know far better than we do which
direction the wind is blowing, and they take advantage of the very short
term. You will never find them buying a stock because they believe in the
company’s product or management!

An Example of “Advantage”
When long-term investors want to protect their investment in a stock, they
generally use a protective “stop order,” which will automatically perform
a sale if the stock price drops lower than a specific figure. The stock
exchange’s hours of activity overlap the working hours of the average
investor, making it difficult for such a person to constantly follow the price
movementin real time. The average investor relies on the broker to carry
out the automated stop order.

How does that help us? Average investors, whom we will call “retail
investors,” review their investments at the end of each week and place
protective stop orders into the system according to the price movement
during the week that passed. These stop orders await automatic execution